Wednesday, February 4, 2009

Flirting with disaster

About that deflation risk - Paul Krugman - "We truly are flirting with disaster."

Shock and oy - Paul Krugman Blog -
". . . it was widely expected that Obama would have a stimulus plan ready to pass Congress even before his inauguration. That didn’t happen. We were told that this was because the economic team was working flat out on the financial rescue.

In fact, when it comes to bank rescue it’s hard to see much evidence that anything was accomplished during all that time; the team is still — still! — running ideas up the flagpole to see if anyone salutes. And the ideas look remarkably bad.

Meanwhile, when it came to stimulus legislation, when Obama finally introduced his economic plan he immediately began negotiating with himself, preemptively offering concessions to the GOP, which voted against the plan anyway. (And Obama appears, in the name of bipartisanship, to have thrown away a Senate vote he may well need.)

As a wise man recently said, failure to act effectively risks turning this slump into a catastrophe. Yet there’s a sense, watching the process so far, of low energy. What’s going on?"

Digby pointed to Michael Hirsh | expressing the new conventional wisdom:
"The reason Obama is getting so few votes is that he is no longer setting the terms of the debate over how to save the economy. Instead the Republican Party—the one we thought lost the election—is doing that. And the confusion and delay this is causing could realize Obama's worst fears, turning 'crisis into a catastrophe,' as the president said Wednesday.

Obama's desire to begin a 'post-partisan' era may have backfired. In his eagerness to accommodate Republicans and listen to their ideas over the past week, he has allowed the GOP to turn the haggling over the stimulus package into a decidedly stale, Republican-style debate over pork, waste and overspending. This makes very little economic sense when you are in a major recession that only gets worse day by day."

I don't think Obama has the best economic advisers. Larry Summers is fat and obnoxious, Tim Geithner has a reputation as a technocrat, and Christina Romer is way too kind to conservative ideas. They are all neo-liberals, which is not a good thing, when what the country needs is revolutionaries.

But, politics is also a process, and it is not, primarily, an economic process, nor a rational process. It is a theatrical process.

It is kind of like a movie, where the bully has to have a series of wins, beating down the oppressed hero, before the hero can win triumphantly at the end. The Republicans may well be winning the battles, but losing the war. We'll see. But, right now, it does not look good. Stay tuned.

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